MODULE 1-DEFINITIONS,RELATIONSHIPS AND MODELS

BGS-BUSINESS
,GOVERNMENT AND
SOCIETY
TOPICS TO BE DISCUSSED

The Study of Business, Government and

Society (BGS)
 Importance of BGS to Managers
 Historical Perspective -Global
 Models of BGS relationships
perspective
 Market Capitalism Model
 Business power
 Dominance Model
 levels and spheres of corporate
 Countervailing Forces Model power
 Stakeholder Model

2
TOPICS TO BE DISCUSSED

Public Policies:
 The Industrial policy and environmental
 The role of public policies in governing policy
business
 Globalization and erosion of culture
 Government and public policy,
 Environmental concerns and corporations
 classification of public policy
 The dynamic environment
 Areas of public policy
 seven key of environments
 need for public policy in business and levels of
 History of environmentalism
public policy.

3
INTRODUCTION

 In the universe of human endeavor, we can distinguish subdivisions of economic, political, and social
activity—that
is, business, government, and society—in every civilization throughout time.
 Interplay among these activities creates an environment in which businesses operate.
 The business–government–society (BGS) field is the study of this environment and its importance for
managers.

4
BUSINESS

 Business is a Profit-making activity that provides products and services to satisfy human needs.
 Business is a broad term encompassing a range of actions and institutions.
 It covers management, manufacturing, finance, trade, service, investment, and other activities.
 The fundamental purpose of every business is to make a profit by providing products and services
that satisfy human needs.

5
GOVERNMENT

 Government refers to structures and processes in society that authoritatively make and apply
policies and rules.
 Like business, it encompasses a wide range of activities and institutions at many levels, from
international to local.
 The focus of is on the economic and regulatory powers of government as they affect business.

6
SOCIETY

 A society is a network of human relations that includes three interacting elements:

 (1) ideas, (2) institutions, and (3) material things.
 Ideas, or intangible objects of thought, include values and ideologies.Values are enduring
beliefs about which fundamental choices in personal and social life are correct. Cultural habits
and norms are based on values.
Ideologies —for example democracy and capitalism are bundles of values that create a certain
world view.They establish the broad goals of life by defining what is considered good, true, right,
beautiful, and acceptable. Ideas shape every institution in a society.

7
INSTITUTIONS/BUSINESS ENTERPRISES

 Institutions are formal patterns of relations that link people together to accomplish a goal.
 They are essential to coordinate the work of individuals who have no personal relationship with each
other.
 In modern societies, economic, political, cultural, legal, religious, military, educational, media, and
familial institutions are salient.
 There are multiple economic institutions including financial institutions, the corporate form, and
markets.
 Collectively, we call these business.

8
WHY IS THE BGS FIELD IMPORTANT TO MANAGERS?

 To succeed in meeting its objectives a business must be responsive to both its

economic and its noneconomic environment.
 Recognizing that a company operates not only within markets but within a society is
critical.
 A basic agreement or social contract exists between economic institutions and other
networks of power in a society
 Establishes the general duties that business must fulfill to retain the support and
acquiescence of the
others as it organizes people, exploits nature, and moves markets
9
DR.MEERA UDAY
11
THE CIRCULAR FLOW OF MARKET/ECONOMIC ACTIVITY

12
HOW INSTITUTIONS SUPPORT MARKETS

13
FOUR MODELS OF THE BGS RELATIONSHIP

 Interactions among business, government, and society are infinite and their meaning is open to
interpretation.
.
 These models are like prisms, each having a different refractive quality, each giving the holder a
different view of the world..
 The following four models are basic alternatives for seeing the BGS relationship.As abstractions they
oversimplify reality and magnify central issues.
 Each model can be both descriptive and prescriptive; that is, it can be both an explanation of
how the BGS relationship does work and, in addition, an ideal about how it should work.

13
THE MARKET CAPITALISM MODEL

 The market capitalism model, shown in Figure 1.2, depicts business as operating within a market
environment, responding primarily to powerful economic forces.
 There, it is substantially sheltered from direct impact by social and political forces.The market acts
as a buffer between business and nonmarket.

 Prices are fixed by law of demand and supply rather than by government or other bodies.

 Market economy is absent of government subsidies, incentives and regulations

14
THE MARKET CAPITALISM MODEL

15
MANAGERIAL CAPITALISM

 Managerial capitalism posits that dominant CEOs would no longer run businesses but instead hired
employees
would run the businesses as a new class of professional CEOs.
 System Thinking Approach combined with Human Motivation is managerial capitalism

16
17
THE DOMINANCE MODEL

 The dominance model is a second basic way of seeing the BGS relationship. It represents
primarily the perspective of business critics. In it, business and government dominate the great
mass of people.This idea is represented in the pyramidal, hierarchical image of society shown in
Figure 1.3.

 Those who subscribe to the model believe that corporations and a powerful elite control a system
that enriches a few at the expense of the many. Such a system is undemocratic.

18
THE DOMINANCE MODEL

19
THE COUNTERVAILING FORCES MODEL

 The countervailing forces model, shown in Figure 1.4, depicts the BGS relationship as a flow of
interactions among the major elements of society. It suggests complex exchanges of influence
among them, attributing dominance to none.
 This is a model of multiple or pluralistic forces.Their strength waxes and wanes depending on factors
such as the
subject at issue, the power of competing interests, the intensity of feeling, and the influence of
leaders.
 The countervailing forces model reflects the BGS relationship in industrialized nations with
democratic traditions.
 It differs from the market capitalism model, because it opens business directly to influence by
nonmarket force
20
THE COUNTERVAILING FORCES MODEL

23
THE STAKEHOLDER MODEL

 The stakeholder model in Figure 1.5 shows the corporation at the center of an array of mutual
relationships with persons, groups, and entities called Stakeholders. Stake-holders are those whom the
corporation benefits or burdens by its actions and those who benefit or burden the firm with their actions.
Primary stakeholders are a small number of constituents for which the impact of the relationship is
immediate, continuous, and powerful on both the firm and the constituent.They are stockholders
(owners), customers, employees, communities, and governments and may, depending on the firm, include
others such as suppliers or creditors.
Secondary stakeholders include a possibly broad range of constituents in which the relationship involves
less mutual immediacy, benefit, burden, or power to influence. Examples are activist groups, trade
associations, and schools.

22
THE STAKEHOLDER MODEL

23
GLOBAL PERSPECTIVE

 Today global capitalism animates the planetary stage, creating movements of people, money,
goods, and information.
 Every government finds its economic and social welfare policies judged by world markets. Every
corporation has a home country, but as shown in Table 1.1, many large multinational corporations
have more sales, assets, and employees outside its borders than within.
 For now, global capitalism is ascendant. It brings unprecedented wealth creation and new material
comforts.
 But it also imposes burdens on human rights and the environment, challenges diversity of values,
and creates conflict with those who are fed upon the free market consensus.

24
SELECT MULTINATIONAL CORPORATIONS WITH HIGH PERCENTAGES OF SALES,ASSETS,AND EMPLOYEES
OUTSIDE HOME COUNTRIES

27
HISTORICAL PERSPECTIVE

History is the study of phenomena moving through time.The BGS relationship is a stream of events, of
which only one part exists today.
Historical perspective is important for many reasons.
It helps us see that today's BGS relationship is not like that of other eras; that current ideas and
institutions are not the only alternative; that historical forces are irrepressible; that corporations both
cause and adapt to change;

28
Business
Power
 The Nature of Business Power

o Companies in ascending industries change societies

by altering all three of their primary elements:
o Ideas
o Institutions
o Material things

3-4
 What is Power?

o Power: The force or strength to act or to compel

another entity to act
o Business power: The force behind an act by a
company, industry, or sector
o The social contract legitimizes business power by
giving it a moral basis
o Legitimacy: The rightful use of power
o Business power is legitimate when it is used for the
common good

3-5
 Levels and Spheres of Corporate Power

o Corporate actions have an impact on society at two levels, and on

each level they create change
o Surface level
o Business power is the direct cause of visible, immediate
changes, both great and small
o Deep level
o Corporate power shapes society over time through the
aggregate changes of industrial growth

3-6
 Levels and Spheres of Corporate Power
Economic power-Petroleum Ability of the corporation to influence events, activities, and people
by
virtue of control over resources
Technological power-Aadhar Ability to influence the direction, rate, characteristics, and
card consequences
of physical innovations as they develop
Political power- Ability to influence governments

Legal power-cyber laws Ability to shape the laws of society

Cultural power-Nuclear Ability to influence cultural values, habits, and institutions such as
Family the
family
Environmental The impact of a company on nature
power- Suzlon
Energy
Power over individuals Exercised over employees, managers, stockholders, consumers, and
citizens
3-7
 Two Perspectives on Business Power

o Dominance theory: The view that business is the most

powerful institution in society, because of its control of wealth
o This power is inadequately checked and, therefore, excessive
o Pluralist theory: The view that business power is exercised in a society
where other institutions also have great power
o It is counterbalanced and restricted and, therefore, not excessive

3-14
PERSPECTIVES ON BUSINESS POWER:
DOMINANCE THEORY

 Corporate asset concentration creates monopoly or oligopoly in markets that reduces competition and
harms consumers

 Merger waves are caused by changes in the economic environment that create incentives to combine

 The public viewed the huge firms as huge monuments to greed

 In the twentieth century, corporations continued to grow in size, but the marked rise in
asset concentration slowed and leveled off

41

3-15
PERSPECTIVES ON BUSINESS POWER: DOMINANCE THEORY

 With economic globalization, the number of  Elite dominance

multinational firms and the scale of their activity has
 Belief that there is a small number of
grown individuals who, by virtue of wealth and
 Adherents of the dominance theory believe that the position, control the

increasing size and financial power of global nation

corporations will be converted into the same old Power elite: A small group of individuals in
abuses control of the economy, government, and military

 The theory of its existence is associated

 No corporation, no matter how large, is assured of
with the American sociologist C.
prospering 42
Wright Mills
3-17
PERSPECTIVES ON BUSINESS POWER:
PLURALIST THEORY

 No entity or interest has overriding power, and each may check and balance others
 Features of Indian society which support the thesis of pluralism
 It is infused with democratic values
 India encompasses a large population spread over a wide geography and engaged
in diverse occupations
 The Constitution encourages pluralism

43

3-19
Boundaries of Managerial Power

3-20
BOUNDARIES OF MANAGERIAL
POWER

 Governments and laws in all countries regulate business activity

 Social interest groups represent every segment of society and use many methods
to restrain business
 Social values are transmitted across generations, reflected in public opinion,
and embedded in the law
 Markets and economic stakeholders impose strong limits

45

3-21
PUBLIC POLICIES

 Introduction: public policy is an attempt by a government to address a public issue by

instituting laws,regualtions,decisions.
 Public policy : it is a basicallya set of rules and regulations set forth that the
public is expected to adhere to.
 Public laws are a classic example of public policy in the legality sense, while the laws of
society are
those that are unwritten but are still expected to be followed in public
 Public policy is a course of action adopted and pursued by a government.
 Public: it comprises domain of human activity which is regarded as requiring
governmental interventions or common actions
 Policy: a purposive course of action taken or adopted by those in power in pursuit if
certain goals and 38

objectives
GOVERNMENT AND PUBLIC POLICY

 A policy is typically designed as principle or rule to guide decisions and achieve rational outcomes.
 The term is not normally used to denote what is actually done, this is normally referred to as either
procedure or protocol.

39
THE ROLE OF PUBLIC POLICY IN
GOVERNING BUSINESS
 When new public policies are created, there are generally three key things involved in the process:
the problem, the player and the policy.
 The problem is the issue that needs to be addressed, the player is the individual or group
that has to be addressed, and the policy is the finalized course of action.
 The rational model for the public policy making process can be typically divided into 3 steps: agenda
setting,
option formulation, and implementation.
 Government officials or the agencies meet to discuss the problem at the end.
 Economic policy :
Economic policy is of vital importance that affects the business.
It deals with the tools that the government uses to manage the economy or solve economic problems
 Social welfare policy:
The nation that the government is responsible for its citizens is a relatively new idea. Social welfare 48
policy is
GOVERNMENT ACTIONS AND PROCESS OF PUBLIC POLICY MAKING

Public policy making can be characterized as a dynamic, complex, and interactive system through which public
problems are identified and countered by creating new public policy
Public policy making is a continuous process that has many feedback loops.Verification and evaluation are essential
to the functioning of this system.The public problems that influence public policy making can be of economic,
social, or political nature.
In public policy making, numerous individuals and interest groups compete and collaborate to influence policymakers
to act in a particular way.The large set of actors in the public policy process, such as politicians, civil servants,
lobbyists, domain experts, and industry representatives, use a variety of tactics and tools to advance their aims,.
 , public policy making is increasingly goal-oriented, aiming for measurable results and goals, and
decision-centric, focusing on decisions that must be taken immediately. 49
THE FOLLOWING ARE THE BELOW POINTS WHICH DEFINES THE
FEATURES OF PUBLIC POLICY

 Public policy is whatever governments chooses to do or not to do

 Public policy is the outcome of struggle in government over who gets what.
 Public policy consists of political decisions for implementing programs to achieve societal goals
 A public policy is a deliberate plan of actions of the government to guide decisions and achieve
rational outcomes

42
CATEGORIES OF PUBLIC POLICIES
Substantive and procedural policies:
This is the classification of public policies with respect to the time of execution.While the former is
the policy the
government is executing,doing,done or executed.
Distributive, regulatory, self regulatory and re distributive policies:
This is the division of public policies with respect to allocation and control.
Distributive policies concern the allocation of services and benefits of public resources to various
segments of the economy. Eg: BPL ration cards
Material and symbolic policies:
This is the categorization of public policies with respect to the tangibility of power and or assets
involved. Material policies are the policies that involve tangible assets or substantive powers to
the beneficiaries or disadvantaged people in the economy. 43
CATEGORIES OF PUBLIC POLICIES-CONTD..

 Policies involving public goods and private goods:

Public goods are collectively owned, divisible and non excludable, so the policy is that they must be
provided for everybody in the economy.
Example of public goods is Defence. Private goods are the goods that are privately owned,
indivisible and
excludable. For ex: food, book, clothes, houses
 Liberal and conservative policies:
This is the specification of policies with respect to freedom and ability to influence or change
policies.
Liberal policies are the policies that are easily amenable. For ex: Social policies on equality,
movement of
people, employment. conservative policies are the policies that are rigid or difficult to 44

change.
RELEVANCE OF PUBLIC POLICIES

 Scientific understanding
 Improves our knowledge of society
 Linkages between social and economic
conditions
 Response of political system to those
conditions

45
TYPES OF PUBLIC POLICIES

1.Defence policy:
It is a public policy dealing with international security and the military. it comprises the measures and
initiatives that governments do or do not take in relation to decision making and strategic goals such
as when and how to commit national armed forces
Purpose of defence policy:
Defense policy identifies threats of hostility and aggression based on intelligence analysis, and defines
military scope of national security, defence alliances, combat readiness, military organization of
national forces and their use of military technology.
Development of defence policy:
A defense policy is created through the defense policy process of making important organizational decisions,
including the identification of priorities and different alternatives such as defense personnel and
technology programs or budget priorities.
46
2. DOMESTIC POLICY

 It is an area of public policy which concerns laws government programs, and administrative
decisions which are
directly related to all issues and activity within a nation’s borders.
 It differs from foreign policy, which refers to ways a government advances its interests in world
politics.

47
3. ECONOMIC POLICY
 Every economy has economy policy :
A few example of types of economic policy include:
1. Macroeconomic stabilization policy tries to keep the money supply growing, but not so quick that
it results in
excessive inflation.
2. Trade policy refers to tariffs, trade agreements and the international institutions that govern
them.
3. Policies designed to create economic growth
 policies related to development economies
 Redistribution of income, property or wealth
 Regulation
 Anti trust
 Industrial policy
 Technology based economic development policy 48
4. EDUCATION POLICY

 It refers to collection of laws and rules that govern the operation of education systems. Education
occurs in many
forms for many purposes through many institutions.
 Ex: it include early childhood education, till 10th standard

49
5.ENERGY POLICY

 It is the manner in which a given entity has decided to address issues of energy development
including energy,
distribution and consumption.
 The attributes of energy policy may include legislation, international treaties, incentives to
investment, guidelines for energy conservation, taxation and other public policy techniques.

50
THERE ARE 4 MAJOR DRIVERS FOR ENERGY POLICY

 Rapidly growing economy with a need for dependable and reliable supply of electricity, gas
and petroleum products
 Increasing household incomes, with a need for affordable and adequate supply of electricity and
clean cooking fuels
 Limited domestic reserves of fossil fuels and the need to import a vast fraction of the gas
 Indoor, urban and regional environmental impacts necessitating the need for the adoption of
cleaner fuels and
cleaner technologies

51
 6.ENVIRONMENTAL POLICY
 It is useful to consider that environmental policy comprises ajor terms; t and policy.
two m environmen imension(quality of life)
 Environment primarily refers to the ecological dimension o take account of and an
but als economic dimension(resource management) social d
Benefits
 fromenvironment
To implement government friendly policies the government is announcing green initiatives, tax
exemptions for the
companies who is following environment friendly policy
Eg: planting saplings
Neem Urea
Waste management workshops
Plastic ban

52
7.FOREIGN POLICY

 It is also called foreign relation’s policy, consists of self interest strategies chosen by state to
safeguard its national
interests and to achieve its goals within the international relations environment.
 Eg: India Pulls out of SAARC summit
Discussion on India’s Foreign Policy

53
8. HEALTH POLICY

 Health policy can be defined as the “decisions, plans, and actions that are undertaken to achieve
specific health care goals within a society.”
 According to world health organization, an explicit health policy can achieve several things: it
defines a vision for the future; it outlines priorities and the expected roles of different groups; and
it builds consensus and informs people.
 There are many categories of health policies, including personal health care policy,
pharmaceutical policy, and policies related to public health such as vaccination policy, tobacco
control policy.
AYUSH-Ayurveda,Yoga,Unani,Sidda,Homeopathy Campaign

54
NEED FOR BUSINESS POLICY

Need for business policy Features of Public

Policy
 Business policy defines the scope or spheres
within which decisions can be taken by the  Specific
subordinates in an organization.  Clear
 It permits the lower level management to deal  Reliable
with the problems and issues without
 Appropriate
consulting top level management every time
for decisions.  Simple
 Inclusive
 Flexible
 Stable
55
ELEMENTS OF PUBLIC POLICY

 A public policy is an action by a government that affects public welfare.

It includes:
1. Laws
2. Rules and regulations(FSSAI)
3. Programs(welfare, Medicare) and practices
4. Specific policy changes
5. At international, national, state and local levels
Discussion on Food safety

56
CORPORATE AND PUBLIC POLICY

 In addition to being socially responsible firm, a firm’s social responsiveness is also of interest.
 Generally, companies react to issues after they have been brought to light.
 Corporations should have policies in place that identifies their views on issues and willingness to
stand behind those views.
 This is known as corporate public policy

57
PLANNING AND IMPLEMENTING CORPORATE PUBLIC POLICY

The adoptions of a corporate public policy agenda involves 5 steps.

1. Scan the environment
2. Assess organizational assets meaning that once social trends have been identified, the
company must figure out how it can address that trends and whether it has the ability to do
so with its current assets
3. The third step is to set the policy
4. The fourth step is to implement the policy
5. The fifth step is to measure the results

58
FRAMING OF PUBLIC POLICY

Public policy is created by legislation. It is generally defined as the principles or standards

regarded by legislature, or the courts, as being of fundamental concern to the state
and the whole of society.
How is public policy framed?
It is formulated with active involvement on the part of interest groups whose members
do not seek election.
 It comprises of expert and panel to make final judgment
 Based on the feedback or opinion of the expert committee the public policy is framed

59
CYCLE OF PUBLIC POLICY

The below is the public policy cycle:

1. Agenda setting: problems are defined and issues are raised. Gate keepers filter out those which
will be given attention by either the executive or the legislative branches
2. Formulation: analysis and politics determines how the agenda item is translated into an
authoritative
3. Implementation-the authorized policy must be administered and enforced by an agency of govt.
the agency must take instructions as stated in the policy, but will probably be called upon to
provide missing pieces and to make judgments as to intent, goals, timetables
4. Budgeting: Financial resources must be brought to beat within an ongoing annual stream of budget
cycles.
5. Evaluation-the impact of the policy may be assessed . If goals exist, the effectiveness of the policy
and its components can be determined.The feedback provided by evaluation is injected back to
the agenda setting and frame new policies 60
GOVERNMENT CONTROLS AND
REGULATIONS

 In 1951 the government brought in Industrial development and

regulations act.
 This act made licensing a part of industrial development
 The objectives of licensing were started as :
 Facilitate desired pattern of industrial development
 Provide for development of backward regions
 To encourage broad based ownership of industries
 To prevent concentration of power in the hands of a few
7
0
GOVERNMENT REGULATIONS IN BUSINESS

Social, technological and value

change
1. National security
2. Technological Advances
3. Human Rights
4. Quality of life

62
INTERACTION OF BUSINESS, GOVERNMENT AND THE PUBLIC

 Government/ business
relationship
 Public/government
relationship
 Business/public relationship

Two major regulatory issues

 Industrial policy
 privatization
63
TYPES OF REGULATION

 Economic regulation
 Social regulation
- Environmental protection agency
- Occupational safety and health
administration
- Equal employment opportunity commission
7
3
BENEFITS OF REGULATION

Benefits of regulation
 Fair treatment of
employees
 Safer working conditions
 Safer products
 Cleaner air and water

74
Dynamic
Environment
 Case study- Royal Dutch Shell PLC
1. One of the world’s largest companies
2. Each year it makes capital investments of between $30 billion and $40 billion

3. In the 1970s pioneered the use of scenarios in corporate planning

4. When an oil restriction surprised the world in 1973 Shell was the only major oil firm prepared for the
supply interruption

5. Shell sees an emerging drama in the global energy system, with tensions building at the intersection of
three powerful trends

6. Developing nations with expanding populations are using policies of economic growth to alleviate
poverty
7. Supplies of oil and gas cannot keep pace with rising demands for energy
8. Environmental stresses are growing
9 DEEP HISTORICAL FORCES

77
1.THE INDUSTRIAL REVOLUTION

Historical force: An environmental force of unknown origin and Requirements for industrial growth:

mysterious action that provides the energy for events  Sufficiency of capital, labor, natural resources and
 The discussion divides this force, somewhat
fuels
artificially, into nine separate but related forces
 Adequate transportation
causing distinct chains of events
 Strong
markets
The Industrial Revolution: An economic  Ideas and institutions that support the productive blend of all

the above ingredients

metamorphosis in England in the late 1700s

 Industrial growth remakes societies in positive ways, but also

 It occurred when certain necessary conditions were present generates strains in the social fabric
 The total amount of goods and services produced in the twentieth
and shifted the country from a simple agrarian economy into a
century exceeds all that produced in recorded human history 78

growing industrial economy

2.INEQUALITY

• The basic political conflict in every nation, andoften between

nations, is the antagonism between rich and poor
• The industrial revolution accelerated the accumulation of wealth and widened
the persistent problem of its uneven distribution
• Global income inequality is measured by the Gini Index
• Gini index: A statistical measure of inequality in which zero is perfect equality
(everyone has the same amount of wealth and 100 is absolute inequality (a single
person has all wealth)
79
DR.MEERA UDAY
80
3.POPULATION GROWTH

▪ The basic population trend throughout human history is upward

▪ Accelerated growth after 1825 due to:
▪ Advances in water sanitation and medicine, reduced the number of deaths from infectious
disease
▪ Mechanized farming, expanded the food supply
▪ Rapid growth now declining due to declining fertility
▪ Implications of current population trends:
▪ The wealth gap between high- and low-income countries will widen
▪ Growth will continue to strain the earth’s ecosystems.
▪ The West is in demographic decline compared with other people
 World Population is7.4 billion-As of August 2016 , it was estimated at 7.4 billion.The
United 81

N a t ions estimates it will further increase to 11.2 billion in the year 2100.
A UD A Y
HISTORICAL WORLD POPULATION GROWTH AND PROJECTIONS:
1 A.D. TO 2300

73
4.TECHNOLOGY

• Throughout history new technologies and devices have fueled commerce and reshaped societies.

• Printing press

• Steam engine

• New technologies:
• Foster the productivity gains that sustain long-term economic progress
• Promote human welfare
74
WAVES OF INNOVATION SINCE THE BEGINNING OF THE
INDUSTRIAL REVOLUTION

75
 5.GLOBALIZATION

• Globalization: The creation of networks of human interaction that span

worldwide distances
• Consequences of globalization: Increased economic activity
Changed cultures

• Globalization has been accelerated by new technologies, and sometimes slowed

by national rivalries and wars
• Transnational corporations are the central forces of current economic globalization
76
 6.NATION-STATES

• Nation-state: An international actor having a ruling authority, citizens, and a territory with fixed
borders
• Arose out of the wreckage of the Roman Empire

• In the past, nations increased their power by seizing territory from other nations
• Today, nations use trade to increase their power
• Trade through world markets is a new source of power, but it also limits the ability of regimes
to control their economies

• Other forces such as epidemics, climate change, terrorism and international norms also limit
n a a t i on-state's
Er AU D A Y 86

autonomy
 7.DOMINANT IDEOLOGIES

• Ideology: A set of reinforcing beliefs and values that constructs a worldview

• The industrial revolution was facilitated by several ideologies:
• Capitalism

• Constitutional democracy - protection of individuals’ rights

• Progress - the idea that humanity was in upward motion toward material betterment
• Darwinism - constant improvement characterized the biological world
• Social Darwinism - evolutionary competition in human society weeds out the unfit and advances
humanity
• Protestant ethic - hard work, saving, thrift and honesty lead to salvation
• Many doctrines have perished as a result of globalization
• The capitalism ideology accelerated in the 20th century due to rising literacy and innovations that spread
87
DR.MEE R A U DA Y
i n f o r mation
 8.GREAT LEADERSHIP

• Leaders have brought both beneficial and disastrous changes to societies and
businesses
• Two views of historic leaders:

• Leaders simply ride the wave of history

• Leaders themselves change history

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9.CHANCE

• Some changes in the business environment may be best explained as

the product of unknown and unpredictable causes.
• Machiavelli observed that fortune determines about half the course
of human events and human beings the other half.

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7 KEY ENVIRONMENTS OF BUSINESS

 Economic Environment
 Technological
Environment
 Cultural Environment
 Government
Environment
 Legal Environment
 Natural Environment
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 Internal Environment
 THE ECONOMIC ENVIRONMENT

The economic environment consists of forces that influence market operations, including:
• Overall economic activity
• Commodity prices
• Interest rates
• Currency fluctuations
• Wages
• Competitor’s actions
• Government policies

• Two basic sub trends underlying economic growth:

• Rising trade
91

• Major expansion of foreign direct investment by transnational corporations

THE TECHNOLOGICAL ENVIRONMENT

• New technologies create both threats and opportunities

• Technologies such as nanotechnology, open sourcing, and collaborative
computing will have a significant impact on business
• New technologies have unforeseen consequences for society when they are
put into widespread use for commercial gain
• Businesses must carefully weigh not only the strategic impact of
technologies on their business models, but also the dangers they may
impose on people
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 THE CULTURAL ENVIRONMENT

Culture: A system of shared knowledge, values, norms, customs, and rituals acquired by
social learning

• The environment of a transnational corporation includes a variety of cultures.

• This variation causes conflicts of business customs
• There is a fundamental divide between the culture of Western economic development and the rest of the
world’s cultural groupings
• The rise of postmodern values has uniformly shifted the social, political, economic, and sexual norms of
wealthy countries
• Postmodern norms are a strong influence in the operating environments of multinational corporations
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THE GOVERNMENT ENVIRONMENT

• There are currently two long-term global trends in the government environment of major importance to business:

• Government activity has greatly expanded

• Larger social welfare roles

• Expanded regulation of domestic industries

• More governments are becoming open and democratic

• Governments increasingly respond to public demands for corporate social performance

• These demands reflect postmodern vales promoting human rights, the environment, aesthetics, and ethics

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THE LEGAL ENVIRONMENT

• The legal environment consists of legislation, regulation,

and litigation
• Five enduring trends:
• Laws and regulations have steadily grown in number and
complexity
• Corporations have expanding duties to protect rights of stakeholders
• Globalization has increased the complexity of the legal environment
and expanded the application of voluntary codes of conduct
• Ethical behavior and corporate social responsibility often 86

become codified in laws

THE NATURAL ENVIRONMENT

• Economic activity is a geophysical force with power to change the natural environment
• Economic productivity in the 20th century has:
• Depleted mineral resources o Reduced forest cover
• Killed species
• Released molecules not found in nature
• Unbalanced the nitrogen cycle o Possibly triggered climate change
• The human ecological footprint moved beyond the earth’s carrying capacity in the
1980s and is now unsustainable
• Managers must adapt to changed thinking, toward preservation of nature
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 THE INTERNAL ENVIRONMENT

 In a corporation, the internal environment consists

of four groups: employees, managers, the board of
directors, and owners
 Each of these groups has different objective, beliefs,
needs, and functions that must be coordinated
 Forces in external environments have
recently reduced the power of these internal
groups

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THE DYNAMIC ENVIRONMENT OF BUSINESS

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 CASE STUDY

The Nestle case study is related to Nestle.

a) Which model is illustrated?
b) Give 2 examples from the case study information as evidence to support
your
answer to (a).
c) If you owned shares in Nestle, would you be happy about the activities
described? Explain your reasons.
d) Carry out research on Nestle – does the corporation always
demonstrate good practice? 90
NESTLE – Case Study
Village Women Dairy Development Programme

 Acknowledging dairy farming as one of the substantial contributing factors to rural development, Nestlé India has
been working with local dairy farmers since 1961.This successful long term relationship is based upon the
foundation of trust that the Company has built with farmers by closely working with them through its philosophy
of Creating Shared Value.
 Today, we work with around 100,000 milk farmers collecting about 300 million kilograms of quality milk every year.
 Our Agriservices team, including agronomists and veterinarians, engage people at the farm level to provide
training and technical assistance to farmers to improve quality and productivity of milk while developing
sustainable farming practices at the same time.
 While engaging with rural communities, we recognised that village women are the primary caretakers of cattle
and play a significant role in dairy farming. As a result, the Village Woman Dairy Development(VWDD)
Programme - an initiative focusing on empowering village women engaged in dairy farming was formally
launched in 2006.
 The objective of the programme is to empower women dairy farmers to improve quality and productivity of
milk.Through education we aim to harness their potential by building an entrepreneurial spirit in village
pArYogramme has positively impacted lives of women dairy farmers and enhanced their understanding on how
women.To date, the programme has reached to over 58,600 village women across the States of Punjab, Haryana 101
to adopt sustainable dairy farming practices.These are some among the many success stories.
and Rajasthan.
Few lines from the beneficiaries…..

 My family consists of my husband and two sons. Ever since I got married I have been
working in the farm along with doing the household work. Over the last few years we have
experienced quite a huge economic improvement as my contribution to the family’s
income has increased. Initially I had two cattle and most of the milk collected was used
within the house. However, over the years, by implementing what I learned from the
VWDD programme, I have been able to improve the productivity of my cattle and expand
my cattle.Today I have six cattle and earn a monthly income of about Rs. 24,000 from
selling milk. I also help my husband in running the Nestlé milk collection agency and we
collect more than 1,000 liters of milk from the nearby villages. Recently I started my own
biogas plant, which I learnt about through the VWDD programme.This plant helps us easily
meet the energy needs of our farm and kitchen.”
 Manjinder Kaur, 42 years -Village Daya Kalan, Moga district, Punjab
92
Few lines from the beneficiaries…..

 “My family owns sixteen acres of land where we grow wheat, paddy, vegetable and fodder
for our cattle. Initially, we had two cattle and never really planned on expanding our
dairy as we were earning our income from farming. But when I participated in the VWDD
programme and learnt that I could earn from dairy farming as well, I started investing in
expanding our cattle herd.
 I also learnt about sustainable agricultural practices and encouraged my husband to start
implementing them in our farm. Currently I have nine cattle and sell 75 kgs of milk in a
month, this has not only increased our income but also improved our livelihood. I have
been saving money to reinvest in the
dairy farming and to contribute towards my children’s higher education. I also plan to
build a cattle shed and a biogas plant on our farm. I feel the VWDD programme has not
only helped me but many other women in the region who have been able to contribute
to their household income and overall development of the region.” 93

 Raj Kaur, 50 years-Village Kishan Pura, Moga district, Punjab

1. Why is BGS field important to
managers?
2. Does Business have the power to change society? How?
3. What is the difference between primary & secondary stakeholders? Give examples.
4. What is public policy? Explain the classification of public policy
5. Explain the historical forces that changes the business environment
6. Write a note on Market capitalism Model
7. Discuss how institutions support market
8. What is the need of regulation of business by Government.
9. What are the environmental concerns of modern societies? How are they being addressed by
Government?
10. Write short notes on: • Sustainable Development and • 104
Environmental Audit
End of Module
1

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